A landlord's Guide to Deposits and Guarantors

As a landlord you don’t have to take a deposit from the tenants renting your property, but most do choose to, to protect themselves if a tenant causes expensive damages to the property, or breaks the tenancy agreement in any way which leaves them at a financial loss.

What is a deposit?

Deposits are typically one or two months rent, and are repaid to the tenant in full, providing the property’s left in good condition, all bills are paid, and the terms of the tenancy agreement are met. You may decide to keep a portion of your tenants’ deposit money to pay for any damages that were caused – such as broken furnishings, or a burn in the carpet. As a landlord, you cannot however keep a portion of your tenants’ deposit due to fair wear and tear taking place.

But what constitutes fair wear and tear?

Sometimes though, it can be difficult to identify what constitutes fair wear and tear, and what damages the tenant should be required to pay for.

Normal wear and tear refers to the deterioration that you would expect to take place over time in a property being respectfully lived in. This does not include damage caused by carelessness, neglect or abuse. For example, it’s normal for a carpet to become worn over the years, or for the colour to fade. However, if there were dark mud stains covering the carpet you would be responsible for paying for a professional cleaning service, or even a replacement carpet.

What should your do with your tenant’s deposit?

Legally, landlords and letting agents are required to keep their tenants’ deposits in
a government-backed tenancy deposit scheme.

You are also required to let your tenants know which scheme their deposit is protected under, which in England and Wales should be either the Deposit Protection Service, MyDeposits or the Tenancy Deposit Scheme.

Deposit disputes

The first step in settling a dispute with your tenants should be to discuss the issue with them to see if you can come to an arrangement. If this doesn’t work, you can get in touch with a mediation service, which may help you come to an agreement quicker and without the expense of a court case. If this still doesn’t settle the issue however, taking your tenants to court is your remaining option.

As a landlord, you must return your tenant’s deposit money providing they: meet the terms of the tenancy agreement, leave the property in the same condition it was when you arrived (with the exception of fair wear and tear), and ensure all bills are paid and up to date.

Where damage has been caused, you’re not permitted to charge tenants for the full value of a damaged or broken item unless it is brand new. For example, if a bed is broken after 6 years that should have lasted 12 years, tenants are only required to pay ½ of the price to replace it.

If there’s a dispute with the landlord over the amount of deposit you should get back – the scheme protects the deposit until its resolved. We’d recommend both parties taking photographs of the premises before the tenancy begins, to help protect themselves should a dispute arise.

Producing an inventory that states the condition of all elements of the property, either yourself or through a letting agent, will also help protect you in the event of a dispute.

Guarantors

A rent guarantor is a third party who agrees to pay a tenant’s rent in the event that they are unable to pay it themselves. Landlords don’t always require a guarantor – often they only require one in situations where the tenants may be more of a risk; for example, if the tenant is a student, unemployed or are a first-time renter. However, it’s your personal decision whether or not to require your tenants to provide a guarantor.

As a landlord, it’s also your right to decide whether a prospective guarantor is suitable, based on factors such as income, credit checks and references – in much the same way you decide whether a tenant is suitable. The difference when approving a guarantor is that you may require a guarantor to earn a higher salary than you would for a tenant – as in the event of a tenant failing to pay rent, the guarantor would need to be paying the tenants rent alongside their own financial obligations.

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